Computers that digest the news to change trading

Discussion in 'Wall St. News' started by just21, Dec 11, 2006.

  1. just21


    Dan Sabbagh, Media Editor, The Times, London

    # Reuters 'tags' its own articles
    # Is the City trader obsolescent?

    Computers that read news stories and use the information gleaned as a basis for trading will become widespread over the next five years, Reuters said yesterday.

    The information provider will make available today a tagged version of its news feed — which provides 8,000 news stories a day — to make them easier for computer-based trading systems to digest. It describes the effort as generating “machine-readable news”.

    Peter Moss, the head of Reuters Enterprise Solutions,said: “In three to five years a much more sophisticated set of algorithmic trading will emerge, based on information as well as market data.”

    Today about 60 per cent of trading in the United States is conducted by computer; in London the proportion is estimated to be 40 per cent. But the trading patterns used by algorithmic systems are based principally on price and volume data, although the situation is changing fast.

    Computers reading news — in effect, trying to simulate human judgment — signals the beginning of the end for the brash City trader. It heralds an era in which human intervention in trading systems will be dominated by programming and monitoring computers.

    To help banks and hedge funds to generate their own trading models, Reuters is also making available a news and price archive dating to January 2003. That is intended to help to develop and test trading models based on historic information. Massive amounts of data are involved: the archive will include nearly 12 million news items and pricing information is updated up to 23,000 times a second, which includes data obtained from 258 exhanges and markets around the world.

    Richard Brown, of the company’s machine-readable news programme, said that such systems will help computers to gauge how far the market will react to an earnings miss — but may also help to forecast an economic or political surprise by detecting a “flurry of news stories” before the crucial moment.

    Initially, Reuters is supplying only its own news stories and it is asking its own journalists to help to tag the stories with five to ten key items of information. Through licensing agreements, the company could supply news stories from newspapers and other outlets.

    However, the information provider believes that its clients will develop tagging systems of their own. “This is a stealth technology,” Mr Brown said, noting that many of the company’s clients refuse to disclose how they hope to use the data.

    Reuters expects that computers will be able to weight news stories based on the language used to evaluate how tenatative they are — and check the byline to establish whether it has been put together by a specialist in the subject in question.
  2. bluud


    I bet some banks and brokers are already using some sort of AI in their trading software to analyze news; rss feeds

    but still it's freaky to hear that

    i guess there will be a great change in how the market moves
  3. dude , they must have been doing this for 10 years.

    Must be selling it cause it aint worth s**t anymore.
  4. Just another gunslinger hits town. Come to daddy...
  5. atozcom


    Unemployment rate up = good news, because it will easy inflation.

    Unemployment rate up = bad news, retail sale will go down.

    Unemployment rate up = good news pressure on wage ease.

    Unemployment rate down = bad news, because it will force wage to go up and cause inflation.

    Unemployment rate down = bad news, wage go up, price of goods go up.

    Unemployment rate down = bad news, price go up, sales go down.

    Interest rate go up = good news, US dollar go up.

    US dollar go up = bad news, export are more expensive, less competitive.

    Interest rate go up = bad news, house payment go up, credit card payment go up.

    Interest rate go up = good news, getting more from saving & bonds.

    Interest rate go up = bad news, less dollar after payment to everything else.

    Interest rate go down = bad news, US dollar goes down, import are now less expensive.. bad for local manufacturer.

    How do you program the computer When good news can be bad news, and bad new can be good news and no new can be good news ?

    It is not possible to directly program the meaning of text (news) without some kind of good/bad rating by somebody.
  6. I recall reading that Warren Buffet is the second richest person in the world and he does not use a computer.
  7. True. Warren only uses pencils.
  8. So much computing power, in fact more than ever and yet returns for the majority (especially the biggest players with the most technology/money) are at their lowest in many years. Pffffffttttttt.
  9. Companies have spent years and millions of dollars unsuccessfully trying to get computers to perform much simpler tasks. Easier said than done. There isn't a uniform rubric for trading all stocks anyways.

    For instance, the essay components of standardized tests use a rubric. Testing companies, state education boards, etcetera cannot develop a program to reliably analyze the simplest essay responses.
  10. The end will be when computers can reliably predict human decisions that are subjective and not objective. In the interim, the systems that use news feeds should be able to profit from events such as an announcement made during market hours that a stock is being added to an index.

    This development where Reuters publishes and sells the news to a system that makes decisions based on "language" is ripe for exploitation. A staff writer at Bloomberg fabricated a news flash for Emulex in 2000 and tried to profit off the stock's collapse in personal accounts.
    #10     Dec 12, 2006